Walter Smith turns down Wolves

Smith is understood to have held talks with Wolves owner Steve Morgan and chief executive Jez Moxey about taking the post until the end of the season after emerging as the favourite to step into the breach

The 63-year-old has been out of football since ending his second spell in charge of Rangers at the end of last season but has declined the opportunity to return to management in the Barclays Premier League.

Wolves have endured a fruitless search in the past few days with Alan Curbishley, Reading's Brian McDermott and Brighton's Gus Poyet all rejecting their interest.

Former Sunderland boss Steve Bruce appeared to be the favourite after being interviewed last week.

But Smith then moved into pole position and Wolves had even been hopeful of him being in place for Saturday's clash at Newcastle.

Smith has previous experience of managing in the Premier League during four years at Everton and was briefly Sir Alex Ferguson's assistant at Manchester United at the end of the 2003-04 season.

He was also manager of Scotland for two years before returning to Ibrox in 2007 for the second time when he led the Glasgow club to three successive titles and the 2008 UEFA Cup final.

Curbishley rejected the chance to replace McCarthy for a second time on Tuesday after initially being interviewed last week.

McDermott yesterday signed a new three-and-a-half-year contract with Reading.

Poyet has confirmed Wolves' interest but is happy to remain at Brighton for the foreseeable future.